Volatile Week Of Trading

A volatile week of trading was expected as the world anxiously awaits the U.S. election, and the early results have not disappointed.

WTI just turned positive after being down $2/barrel overnight, and refined products are trading a nickel above the lows set in the first 10 minutes of Sunday night’s session. Stronger equity markets, credited to a Chinese manufacturing report reaching a 10 year high, seem to be helping prices look past the risk of more COVID lockdowns for now.   

The 5% bounce sets a good short term layer of technical support at the overnight lows $33.64 for WTI, $.97 for RBOB and $1.02 for ULSD. That support may be tested again as longer term charts continue to favor another move lower, and likely a longer-lasting move below $1 for refined products.

Marathon reported a $1 billion loss for the third quarter this morning, with its refining and marketing segment losing more than $1.5 billion (compared to earnings of nearly $1 billion a year ago) which was partially offset by strong earnings in its mid-stream operations. The results also included $433 million in impairment expenses primarily due to “repositioning the Martinez refinery” and $348 million in restructuring expenses related to idling two refineries and their workforce reduction. The sale of Speedway is still on track for Q1 2021, and renewable diesel production is starting at its Dickinson, ND facility. 

Baker Hughes reported 10 more oil rigs were put to work last week, a sixth consecutive weekly gain. Nine rigs were added in the Permian basin, and one was added in the Eagle Ford.  With the recent selloff in prices, it seems like we might see the recovery stall out over the next month or so as operations catch up with prices. 

Money managers continue to seem unenthusiastic about energy contracts.  The large-speculative category of trader made small reductions in the length held in WTI and RBOB positions last week, made a small increase in the short position in ULSD, and a small increase in Brent length. Open Interest in Brent dropped to its lowest in two years.

Hurricane Eta formed in the Caribbean over the weekend, continuing 2020’s record setting storm streak. This hurricane is not a threat to the U.S. however as it is expected to make landfall in Nicaragua Tuesday.

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